Calculating the amount available

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Calculating the amount available

Some building societies are currently restricting loans on this basis to 'professional people' in their thirties or older. Although this might seem unfair at first sight, the point to be made (which is often obscured by the building societies themselves, in their 'mass market' approach to business) is that no one has a 'right' to a mortgage loan and the societies have to assess the credit risk in each case.

With a pension mortgage in particular, the society is granting an interest-only loan for anything up to 30 or 35 years. Although they have the 'comfort' of the fact that you are also undertaking a pension plan, they cannot have the legal security of it, as pension plans are non-assignable.

The lower age limit is presumably because societies feel that people in their twenties can rarely be certain of the pattern of their career. If they subsequently joined a company with a pension scheme they would be ineligible to carry on contributing to their pension plan.

If you are looking for a pension mortgage, therefore, you should be prepared for the necessity of presenting yourself to the building society, rather in the manner of the Advertising Standards Authority catchphrase, as 'legal, decent, honest and truthful'.

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More on building societies

We mentioned earlier that a number of major building societies are prepared to undertake pension mortgages. One society, the New Cross, is willing to consider giving loans on the basis of a single premium pension plan; the others all require regular premium pension plans to be taken out.

How much will they lend?

As with endowment policies, building societies have particular rules as to how much they will lend. Most will consider a loan that is equal to 0.8 to 1 of the anticipated cash sum available at retirement. The Woolwich stipulates 0.25 of the total fund available at retirement (which, they reckon, is about equivalent to 1 of the cash sum).

The other lending criteria also remain, so that getting a pension mortgage is rather . . .... see: More on building societies

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